Ben Venter Chairman: BANKSETA Council & Conference Session Chair

1. Ben Venter Chairman: BANKSETA Council & Conference Session Chair

2. 6 October 2004 09h15 – 10h00 Pravin Gordhan 10h00 – 10h45 Sizwe Nxasana (by Amanda Singleton) 10h45 – 11h15 Refreshments 11h15 – 12h00 Danisa Baloyi 12h00 – 12h45 Charles Okeahalam 12h45 – 13h45 Lunch 13h45 – 14h45 Ulrich Teichler 14h45 – 15h30 Nicholas Biekpe 15h30 – 16h00 Refreshments 16h00 – 17h30 Peter Senge (Video Conference) 17h30 Cocktail Party

3. LEADING THE WAY IN TRANSFORMATION: THE SARS SUCCESS STORY! Pravin Gordhan Commissioner: SA Revenue Service

4. The 2nd BANKSETA International Conference 2004 Presentation by PRAVIN GORDHAN Commissioner of SARS to

5. SARS Mandate • The SARS Mandate • The organisation is tasked to efficiently and effectively collect - • all national taxes, duties and levies imposed in different pieces of taxation legislation • all revenue that may be collected in terms of any other legislation, as is agreed between SARS and the organ of State or Institution • SARS is also responsible for the control over the import, export, manufacture, movement, storage or use of certain goods • The organisation is also responsible to the provide advice to the Ministers of Finance and Trade and Industry to on all revenue and customs matters

6. The Economy • 1994-2003 • Growth around 3% a year • Investment expands 4.7% a year • Inflation down to <6% • Deficit down to around 3% • Fin account, net inflows of R169,6 bn • Unprecedented ratings upgrades • 1984-1993 • Growth a mere 1% a year • Investment shrinks 2,9% a year • Inflation averages 14,3% • Deficit up to 9.3% in 1993 • Fin account net outflows of R46,1 bn • Investment boycott

7. Basic needs and social services • 1.6 million houses built • 700 new primary health clinics built • Electricity to 4 million homes • 4.5 million children benefit from primary school nutrition programme • Grant beneficiaries increased: 2.9 million to 7.4 million

8. SARS Profile • The SARS profile • Collects approximately 90% of the government’s revenue, in excess of R300 billion in direct and indirect taxation • Administers 22 tax types • Deals with over 5 million taxpayers/ taxpaying entities • Operates from over 100 sites nationwide • Employs over 14 000 staff • Administration costs <1.5% of revenue collected (developed countries 2%; developing countries 4-5%)

9. SARS VOLUMETRICS 3 000 Bonded Warehouses 1,4 Million SACU Movements 4 Million Individual taxpayers 1,7 Million Import transactions 14 000 SARS Employees 1 451 Manufacturers of excisable products & 4 licensed distributors 1,4 Million Export transactions 3 000 Rebate Manufacturers 1,3million Corporate Taxpayers 136 000 Registered Traders/Operators 274 764 PAYE Employers 536 281 Vat vendors

10. REVENUE PERFORMANCE

11. SARS Performance • Stable tax regime • Fiscal stability • Increased revenue yield (exceeding revenue targets) • Significant tax relief (R73 billion) • Broadening the tax base • Improved service

12. OUR LEGACY • 11 separate departments within the Department of Finance. • Declining performance against revenue targets • Unwieldy organisation structures, many layers of management • Procedures were highly bureaucratic, manual and clerical in nature • Weak and outdated physical infrastructure • Wholly inadequate technology infrastructure – disparate line of business systems • Low staff morale with minimal representivity, limited career opportunities and lower than market related remuneration • Prevalence of internal fraud and corruption

13. OUR LEGACY…The SA Climate • The South African compliance climate reflected • Low tax literacy vs high tax complexity • Low tax morality • Negative perception of the tax system and administration • Weak protection of our borders against illicit trade • Preferential tax treatment • Certain sectors • Greater ability to distort tax burdens among the affluent

14. PRINCIPLES OF A GOOD TAX AND CUSTOM ADMINISTRATION (OECD) • A good tax and customs administration should…. • 1. Apply tax laws in a fair, reliable and transparent manner • 2. Outline and communicate to taxpayers their rights and obligations as well as the available complain procedures and redress mechanisms • 3. Treat enquiries, requests and appeals from taxpayers in an accurate and timely fashion • 4. Provide an accurate and dependable information service • 5. Ensure that compliance costs are kept to a minimum • 6. Where appropriate give taxpayers’ opportunities to comment on changes to administrative policies and procedures • 7. Use taxpayer information only to the extent permitted by laws that limit their use to tax officials except under compelling circumstances

15. EVOLUTION OF SARS • Introduced modern employment practices • Standard job descriptions and job specifications • Career paths • Competitive remuneration • New collaborative approach with Unions • Redefined strategic direction of SARS • Vision • Mission • Values • Taxpayer Charter • Code of Conduct • Compliance Model

16. EVOLUTION OF SARS • Refocused efforts on enforcement • Increased audit capacity • Introduced new tools and techniques • Rolled out national campaigns addressing high risk areas • Siyakha “We are Building” • Transformation programme launched • Commenced with organisation wide diagnosis • Implementation of pilot in Kwa-Zulu Natal region • Established centers (Taxpayer Service; Assessment; Enforcement; Customs)

17. EVOLUTION OF SARS • Appointment of a new, representative management team • Provision of modernised infrastructure • Streamlined and standardised business processes – supported by new policies, procedures and skills • Provided a dedicated frontline environment for taxpayers • Focused, high visibility enforcement interventions addressing high risk industry sectors and taxpayers

18. SIYAKHA PROGRESS • Successful implementation in Kwa-Zulu Natal and Western Cape (CBD) • Ongoing transformation in Western Cape and Gauteng • 9 additional offices being converted to the Future mode of operation. • This platform has enabled us to identify further process improvements which are being implemented • Concentration of assessment activities resulted in improved turnaround times • Over 2400 staff have been trained in service and functional expertise • To date, over 3000 staff have either been appointed in new positions or absorbed in terms of the Siyakha protocol • Employment Equity has been improved • To date more than 20 SARS locations (excise, tax and customs) have been improved

19. SARS LBC • • Launch of SARS Large Business Center - 2 September ‘04 • • The LBC Business Model: • Dedicated Sector Managers supported by Taxpayer Relationship Managers for each of the following sectors • respectively: • Financial Services • Mining • Manufacturing • Information, Communication & • Technology • Retail • Primary (Agriculture, Forestry • Logging) • Construction • General & Diverse Holdings Developing enhanced Relationships with our corporate taxpayers based on intimate knowledge derived from industry sector specialization

20. LBC Service Model Providing world-class operational excellence with one-stop - single point of entry for all tax types and effective Administration & Resolution processes A Convenient one stop service for cost effective filing and processing of all tax submissions, as well as the efficient management of accounts, registration of new taxpayers or changes in taxpayer status

21. Noteworthy achievements • Consistently exceeded revenue targets despite undergoing organisation wide transformation • Successfully introduced challenging legislative changes eg. RBT, CGT • Shifted the compliance culture in SA through targeted, visible enforcement • Expanded the business to take on new tax products eg. UIF and SDL • Made initial strides in entrenching a service culture • Provided dedicated service areas • Established a SARS Service Monitoring Office • Released a draft Taxpayer Charter which will entrench service standards • Introduced an online customer feedback system to gauge service satisfaction • Implemented dispute resolution procedures for speedier resolution of administrative issues

22. AT A GLANCE…10 years of delivery BEFORE Low Revenue Weak customs Inefficient processes Ineffective enforcement Poor compliance Poor technology Low skills AFTER Significantly increased revenue collections Visible and more efficient customs More efficient, streamlined and integrated processes Visible and more efficient enforcement Increased compliance culture Enhanced and stable technology platform Enhanced focus on development of technical and management skills

23. A REALITY CHECK • Change is ongoing • We’ve achieved a lot…but there are still many challenges that remain • Challenges we are facing • Revenue administration as a suitable response to the dualistic nature of the South African economy • Widen the net to include both economies; reduce the tax gap • Building fiscal citizenship to ensure a climate of sustained compliance • Achieving a robust administrative machinery that supports revenue growth in a highly effective and efficient technology enabled organisation • Further transforming the organisational culture to reflect greater professionalism, service and integrity

24. THE NEXT WAVE OF TRANSFORMATION • A vision for 2010 • Individuals • Business • SMEs and large corporates • Key shifts • Inward administrative view to outward taxpayer view • Reactive to proactive engagement • Manual to automated • Compliance strategy • Institutional transformation

25. ANTICIPATED OUTCOMES • Smarter SARS • More efficient • Electronically enabled • Visible SARS • Touching all segments • Tax officers in the field • Increasing access to taxpaying community • Responsive SARS • Better Service • Swift detection and deterrence of non-compliance • Learning organisation – leadership and technical capability • These outcomes translate into sustained compliance and delivery on revenue targets

26. RECIPE FOR OUR SUCCESS… • Overall fiscal reform – tax policy and tax administration changes in tandem • Political support of Minister of Finance • Administrative autonomy brings greater flexibility and control • Create a vision for the future • Transformational passionate leadership – actively driving change and instituting a new way

27. RECIPE FOR OUR SUCCESS… • Create a critical mass of change drivers • Evolutionary change but revolutionary thinking – sustain the change. Implement change in manageable chunks • Willingness to engage with all stakeholders and across all functional areas of the business to achieve a holistic robust solution • Integrated process view and enhanced business knowledge

28. Thank You

29. CULTURE CHANGE THROUGH LEADERSHIP Sizwe Nxasana Chief Executive Officer: Telkom Delivered by Amanda Singleton Culture change through leadership Sizwe Nxasana Chief Executive Officer Telkom SA

30. Culture change through leadership Amanda Singleton Group Executive: Corporate Communication Telkom

31. Challenges facing SA leaders Attending to the diverse needs of a complex network of stakeholders Satisfying shareholders while Launching into the global arena and also Addressing local transformation challenges

32. Telkom’s evolution 1997 Partial privatisation 1996 Licensed (with a 5-year exclusivity) under new Telecoms Act 2002 End of exclusivity 1991 Commercialisation 2003 IPO 2004 Competition

33. Why is corporate culture so important? • To survive and prosper in a ever-changing environment, adaptability is key • SA industries need more than gradual adjustment to changing circumstances; we need to shift paradigms • The central challenge: to create and lead an adaptive enterprise

34. Why is corporate culture so important? • No CEO can single-handedly make changes to an organisation’s genetic code • Lasting organisational transformation requires a change in people • A fundamental shift in ‘the way we do things around here’ • Corporate culture change is a prerequisite for successful business transformation • Culture is important: • because it powerfully influences the behaviour of employees • because it is difficult to change and • because its near invisibility makes it hard to address directly

35. The emergence of culture Group Interaction Positive Results Norms of Behaviour Shared Values CULTURE A strong corporate culture = values widely shared amongst employees

36. The value of common values • Values provide the roadmap to the vision • shape the culture needed to realise the vision • Values mould the behaviour – defines the corporate culture • Corporate Culture should accommodate multi culturalism • Umbrella for diverse cultures, languages, backgrounds and national norms • Values have value only when: • they are commonly understood • they are unanimously subscribed to • they are lived by everyone

37. Telkom’s value system • We value people and their diversity • We are performance driven • We are customer focused • We create shareholder value • We are a model corporate citizen • We act with integrity in everything we do

38. The strategic fit “Vision” (to be) communication communication “Strategy” (What do we need to focus on) “Culture” (How to behave along the way) communication Current situation “As is”

39. A Telkom example • Vision: • To be a world-class communication company • Strategic Goal: • To invest in our employees • Value: • We value our people and their diversity • Behaviour needed: • No stereotyping, prejudice and discrimination in the workplace • Fair recruitment, an appreciation for the EE imperative • Making full use of the skills of all employees • Open communication on development needs • Regular discussions on performance and improvement areas • Coaching, mentoring and personal development • Creation of opportunities for personal growth • Retention of critical skills

40. Changing corporate culture • Articulate the company’s vision as a concise word picture describing what the organisation aspires to become • Keep it simple, motivational and realistic • Develop enterprise strategy as “what to focus on” in achieving the vision • Design a set of values • Identify behaviours needed from management and employees to execute strategy • Communicate all of this in coherent and compelling ways • Drive for total contextualisation down to an individual level • The role of every line manager is key

41. Leadership is critical Committed leadership and clearly defined corporate values distinguish major cultural changes that succeed, from those that fail. The single most visible factor that distinguishes major cultural changes that succeed from those that fail is competent leadership at the top … . Only with leadership does one get the boldness, the vision and the energy needed to create large and difficult changes … John P. Kotter & James L. Heskett

42. What culture change demands of Executive Leadership 1. Conceptual Leadership • Chief sense makers for the organisation • Providing insights about the business and markets • The ability to provide direction – defining a vision • The ability to bring vision to reality • Creating strategy to close the gap between vision and current reality • The skill to reconnect organisational life with organisational purpose • “Where are we going and why”; • “What is our company’s role in society”; • “What is the context and meaning of this change in strategic direction” “Without vision, direction and a sense of purpose, it’s difficult to harness the energy, passion, commitment, and perseverance needed to transform”

43. What culture change demands of Executive Leadership 2. Personal Commitment • Leadership is in the first place, PERSONAL • Leadership is about truly living the company’s values • Leadership is setting an example, being a role model • Leadership is consistency between what is SAID and DONE. “One of the most important ways executives can demonstrate their commitment and credibility comes through how they work within their own teams”

44. What culture change demands of Executive Leadership 3. Communication • Effective communication is the oxygen for new-breed leadership • Communication is not one-directional • Engage strategically • Listen hard • Create an environment that allows candid feedback/ criticism • Communication needs to be regular • In good times and bad • Never skip scheduled engagements • Communication has to be open and honest • Own up: take personal responsibility for hard decisions • Resist the urge to spin – it always backfires “People need to hear directly from the leader”

45. The time has come . . . For leaders tostep forwardandshow real leadership

46. Questions?

48. TRANSFORMATION, SKILLS DEVELOPMENT & THE FOCUS ON DEVELOPING LEADERS OF TOMORROW: An emphasis on youth, women and people living with disabilities Danisa Baloyi Chairperson: National Skills Authority

50. Skills Development Transformation, Skills development and Empowerment The Past • Inequality as a policy • Lack of proper education • Lack of properly trained teachers • Lack of opportunity • Lack of cohesion in development structure • Skills gap • Problems in economic growth and development 50